Many2many: I think a generic tagging api is a great idea in general for web3py. If we can leverage that for auth groups too, then why not. Clearly a link table adds complexity to all the queries, but if this is properly serviced by the api, then no prob.
Hierachical tagging, nested sets always seem to be a real pain point for SQL unless recursive CTEs used. But then things start getting a little tricky as the existing DAL doesn't do that (yet?). There is still one easy option available though: materialised path. I think this is a great idea because the queries are super-simple and could easily be implemented for all sorts of hierarchical data structures.
The above options would be more than I suggested for auth groups, but would both enhance the feature-set of web3py and find lots of applications.
Thanks for thinking about these possibilities!